Remember When You Were Young? Musings on COVID & Pink Floyd

This post is for all of you who have asked: “How are they handling COVID in Delaware? What is it like there?” For technical answers, I direct you to Phase 2 of the reopening plan for the Delaware courts. But you can find more interesting answers in Pink Floyd’s Dark Side of the Moon. Let me explain…

1989: Venice, Italy

In the summer of 1989, I was studying abroad in Austria. On July 15th, my friends and I grabbed our Eurail passes and headed south to Venice in search of adventure. There we stumbled into 200,000 Europeans all descending on St. Mark’s square for a free Pink Floyd concert. Who knew?! (Apparently, everyone except us. The spectacle was broadcast to an estimated audience of 100 million.)

Fun Fact: Addressing concerns that the amplified sound could damage the mosaics of St. Mark’s Basilica, while the whole piazza could sink under the weight of so many people, the band agreed to turn the sound down (slightly) and to perform on a floating stage 200 yards from the square.

Now, I am not a Pink Floyd fan. But we were 20 years old and adventure was calling. Loudly. So of course we jumped straight into the mass of humanity streaming towards St. Mark’s. As you can see from this old news footage, there was no social distancing. And with shoulder-to-shoulder / wall-to-wall people all pressing in one direction, there was no going back.

As we made our way over ancient canal bridges, the roads narrowed and at times I was literally picked up off my feet and carried along. At one point, I fell. Dozens of people were pushed forward, apologetically trampling and crushing me underneath, until Ever – a much larger Venezuelan student in our group – grabbed me by my Velcro-like, curly hair and hoisted me to my feet. (Ever, wherever you are today, muchos gracias mi amigo!)

And then, pop!, our little group stumbled forward and into the middle of St. Mark’s square, a light show, fireworks, and people. People everywhere. For any Pink Floyd fans out there, you can watch the entire concert here. But know that being there, in person, connected to all of those people in that one moment – there is no substitute for that experience.

2020: Wilmington, Delaware

Or is there? You may not be aware that Wilmington has an opera house. In fact, there are three venues. The Grand Opera House, the Baby Grand, and the Playhouse on Rodney Square. Together, they deliver “the Best Music, Comedy, Broadway & Variety Shows in Wilmington, Delaware.” But in response to Delaware’s COVID measures, like everything else, all of their scheduled events have been postponed indefinitely.

So imagine my surprise and delight when I received an email from The Grand about an upcoming concert. Adapting to our new reality, they have launched a Concerts by Car Series. And that is how I found myself excitedly purchasing tickets to last Friday’s show, Echoes: The American Pink Floyd, and rushing to the Frawley Stadium parking lot with my husband to listen to The Dark Side of the Moon in “a safe, comfortable, high-quality experience that would blend the special joy of a live concert, the vibe of a drive-in movie and the charms of a summer evening outdoors.”

And sitting on top of our Jeep in 6-feet of socially distant solitude, not having to worry about being imminently trampled to death by hoards of drunken Italians, I had plenty of time to reflect on the lyrics of the actual music this time around.

Originally conceived by the band as a cohesive collection of songs about the pressures of life as a musician, I have now learned that Dark Side of the Moon eventually expanded to include songs about broader topics such as wealth (“Money”), armed conflict (“Us and Them”), madness (“Brain Damage”), squandered existences (“Time”) and death (“The Great Gig in the Sky”). As our country reels from a financial crisis, protests, an increasingly polarized body politic, life in isolation, and a pandemic, those topics are just as relevant today in many ways as they were three decades ago.

So how are things in Delaware? Not any different than the rest of the country, really. Life has been turned upside down. But we are all resilient. And while I miss my old life, the freedom to travel, and the proximity of people, I found myself thoroughly enjoying Friday evening date night with my hubby. Life, after all, is made up of small moments and time spent with the people we care about.

Ticking away the moments that make up a dull day
Fritter and waste the hours in an offhand way.
Kicking around on a piece of ground in your home town
Waiting for someone or something to show you the way.

Tired of lying in the sunshine staying home to watch the rain.
You are young and life is long and there is time to kill today.
And then one day you find ten years have got behind you.
No one told you when to run, you missed the starting gun.

So you run and you run to catch up with the sun but it’s sinking
Racing around to come up behind you again.
The sun is the same in a relative way but you’re older,
Shorter of breath and one day closer to death.

Every year is getting shorter never seem to find the time.
Plans that either come to naught or half a page…

Time. Pink Floyd.

Mette K.

The COVID-19 Financial Crisis: A Survival Guide

Complimentary Webinar
Thursday, March 26, 2020
10 am PT | 1 pm ET

Many experts are cautioning that the COVID-19 pandemic, together with other underlying problems in our economy, can trigger a severe and prolonged financial crisis. In response, Congress is already beginning to roll out economic relief packages. But will your business be able to survive?

If bankruptcy law is “emergency room medicine,” many US business are in a self-induced coma right now. Some are in a mandated coma. Others are in dire health, and their prognosis may look uncertain. When I walked into a local restaurant to pick up an order and show the owners some support this afternoon, the anxiety on their faces was palpable.

But like an emergency room doctor, we can use this time, while many operations are off-line or severely curtailed, to craft strategies and start laying the groundwork to restore businesses to economic health. Indeed, a business can significantly improve its prospects of surviving a financial crisis by being proactive at the onset of a downturn, rather than simply responding reactively.

Join me and my partner, Brian Shaw, for a complementary (and socially distanced) webinar on the evolving economic landscape and the preparatory actions that businesses should be taking now to address the COVID-19 financial crisis.

Register to join us.

/Mette K.

On the 363 Auction Block: Imperial Toy LLC

Imperial Toy LLC has filed for chapter 11 protection in the Northern District of California. The company intends to run a sale process with a stalking horse offer in hand for $13 million from competitor Ja-Ru, Inc. (also providing $5.75 million in DIP financing). The goal? An expedited auction process with a proposed bid deadline of December 12th and a closing before year end. Have cash? Imperial Toy is seeking approval of a $650,000 breakup fee for Ja-Ru and overbids of $100,000, with an initial required overbid of $13.750 million.

Company Overview

Imperial Toy is a California-based manufacturer of bubbles, novelty toys and other children’s products.  Its brands include Blitz, Super Miracle Bubbles, KiddyUp, Zooma, Splat X, and KAOS with sub-brands such as Life-Like and Googly. The company has licensed products with Disney, Marvel, DC Comics, Little Tikes, Thomas the Train and Teenage Mutant Ninja Turtles. 

Imperial Toy has facilities in five locations globally, including its headquarters in North Hills, CA; a San Diego distribution facility; a sales office in Bentonville, AK; and two manufacturing and packaging facilities in Tijuana. Its subsidiary, Imperial Entertainment International, also has a facility in Hong Kong focused on product development and supply chain management. More than 60% of Imperial Toy’s materials are sourced from the subsidiary.

Imperial generated approximately $106.7 million in revenue in 2018, roughly $78.4 million of which is domestic, and $28.2 million generated in Hong Kong.

The Slippery Slide into Bankruptcy

Various external market factors contributed to Imperial Toy’s struggles. In particular, an unusually wet spring delayed the start of its peak sales period and triggered a sharp decline in revenue. And threats of trade tariffs prompted both an inventory accumulation to protect profit margins and a drop in orders as retailers sought to limit their exposure to price increases. These trends “combined to push [Imperial Toy] into an operating loss during the time of year when it should have been profitable and drove a steeper than usual investment in working capital.”

The situation likely wasn’t helped by the fact that Imperial Toy not only took on significant indebtedness to fund growth of the business, but in February of 2018 it entered into an agreements to redeem from the Hirsch Trust 40% of the equity interests in the company. According to the debtor:

“The obligations to the Hirsch Trust originated in February 2018, when the Debtor entered into a series of redemption, loan, security and related agreements with the trust to repurchase and redeem from the Hirsch Trust 40% of the then outstanding equity of the Debtor. The Hirsch Trust received a number of promissory notes from the Debtor and Path Global Ltd., a Hong Kong entity. The Hirsch Trust began to receive cash payments from the Debtor and Path Global relating to the redemption in July 2019 [?] and such payments from the Debtor and IEI continued through the remainder of 2018. . . . The loan obligations are secured (but subordinated) . . . .

Interesting….

/Mette K.

On the 363 Auction Block: Nuvectra Corporation

nuvectra1

Nuvectra Corporation has filed for chapter 11 protection in the Bankruptcy Court for the Eastern District of Texas with the hope of selling substantially all of its assets.

Nuvectra is a Plano, Texas-based neurostimulation medical device company whose core product is Algovita, a spinal cord stimulation system used to treat certain forms of chronic pain. Product performance issues, competitive pressures, and a general slowdown in the spinal cord stimulation market lead to declining sales, erosion in confidence among physicians, loss of sales personnel, and ultimately, the suspension of product sales of Algovita. According to a press release, the company says it is committed to supporting existing patients using Algovita, but it is suspending support of future implants “until the Company’s path forward is determined.”

Piper Jaffray began a marketing process in August, contacting 50 potential parties with respect to a sale or merger of the company as a whole, or Algovita or Virtis (its neurostimulation technology platform currently in an FDA approval process), on a standalone basis. Nuvectra has indicated it plans to conduct a post-petition marketing and 363 sales process over the next several weeks. Nuvectra has not yet filed a motion to approve sales procedures or set bidding deadlines.

Neuvetra’s SEC filings are available for download, and information about is bankruptcy filing is available free of charge on KCC’s website.

Mette Kurth

On the Auction Block: iPic-Gold Class Entertainment, Inc.

iPic-Gold Class Entertainment, Inc. (IPIC) has filed a Chapter 11 case in Delaware to sell its business through a “363” bankruptcy auction.

iPic’s Rise… and Fall

IMG_7496.jpgiPic is a Florida-based, publicly traded movie theater and restaurant company with 16 locations in 9 states that provide a “luxurious movie-going experience at an affordable price.” iPic touts its high-quality, chef-driven culinary and mixology offerings in unique destinations that include premium movie theaters, restaurants and lounges. The debtors’ restaurant concepts include: (1) The Tuck Room, a “drinking and dining den” with locations in Florida, New York, and Texas; (2) The Tuck Room Tavern, which serves “Craveable American Cuisine” in Los Angeles; (3) Tanzy Restaurant, offering modern Italian dining in Florida and Arizona; and (4) City Perch Kitchen + Bar, with seasonal American dining in Maryland, New Jersey and New York.

After achieving double-digit growth supported by its unique offerings and market position, new market entrants and competitive pricing slowed iPic’s growth.  Although demand for shares following iPic’s 2018 IPO was “strong,” the situation was compounded when institutional investors could not fund their commitment to the offering, with the total capital raised of $17 million insufficient to fund continuing development. But the company believes that its underlying business model remains strong, “bolstered by positive guest experience and loyalty.”

A Fast, “Naked” Auction

iPic is going forward with a “naked” auction at this time, with no stalking-horse bidder in hand.  If a stalking-horse offer (e.g., opening bid) is presented before the auction, it appears that it may be possible to negotiate for typical stalking-horse protections such as expense reimbursements and break-up fees. iPic is seeking approval of a 90-day marketing process, with a proposed bid deadline of October 11, 2019 and a sale closing by the first week of November. No minimum bid has been established. The company reports store-level EBITDA of $15.06 million for the year ended December 31, 2018, and roughly $160 million in assets at book value.

The iPic Bankruptcy Docket

iPic’s claims agent is maintaining a public website with information about the case.

Additional Information

Fox Rothschild is monitoring the situation.  If you are interested in more information about the auction and the bid process, we are available to assist.

Mette H. Kurth